[Ferro-Alloys.com]Looking at US prices for prime scrap, pig iron and HBI, it would appear that pig iron and HBI are bargains. Still, few mills are interested in HBI at $325 per mt, c.i.f. New Orleans, and the most recent pig iron sale reportedly was done at $400 per mt, c.i.f. New Orleans. US mills have covered their prime scrap needs for July at prices of roughly $410 per lt, an increase of $30-40 per lt compared to prices in June. Given the order books of US mills, traders are predicting that August scrap prices will be flat to up $10 per lt. AK Steel is expected to restart its blast furnace in Middletown, OH, slightly more than three weeks after it shut because of mechanical problems. Original estimates for the repairs were up to six weeks.

 

Much attention has been given to the re-emergence of the $30-per-lt spread between shredded and busheling scrap, but market sources note that the differential between prime and shredded scrap prices has always been a matter of supply availability. Prime scrap prices have been below shredded scrap when shredded scrap has become scarce. "Everything is about the speed of the melt," said one dealer, "and shredded scrap can be melted in an electric arc furnace faster than prime scrap." Pig iron can be added to the melt to make up for the deficiencies of shredded scrap vs. prime scrap.

 

In the normal order of things, prime scrap is sold at a premium to cut, shredded and obsolete grades. "Pig iron prices can be influenced by scrap prices rising or falling," said a source, "but whether prime is more expensive than shredded or vice-versa has little impact on pig iron, or HBI for that matter."

 

For most of this year, the ups and downs of pig iron prices have been less pronounced than the monthly scrap changes. HBI, meanwhile, has been impervious to changes in either pig iron or scrap. "I can’t sell HBI at $60 less than scrap," said a trader. "A handful of mills use it, and they are not buying."

 

The problems in Venezuela have resulted in vastly reduced HBI exports. Still, the lack of HBI buying interest raises the question of how much appetite there will be for the DRI capacity being built in the US. Nucor’s 2.5-million-tpy DRI plant is slated to come onstream later this year (Ryan’s Notes, June 3, p5), and there are reports that Nucor plans to use only some of the output internally. The rest will be sold in the merchant market. "What mill is going to buy Nucor’s DRI when no mills are buying Venezuelan HBI?" asked a trader.

 

Nucor is the first of several DRI/HBI projects on the drawing board in the US. "HBI is a hard product to sell," said a trader. "It doesn’t provide sufficient iron and it does not add efficiencies."